The Fed is tasked by Congress with a " dual mandate " to keep inflation low and employment high using the fed funds rate, which is the interest rate banks charge to borrow money from one another. The fed funds rate affects borrowing costs on short-term loans like credit cards and car loans, and indirectly influences longer-term loans like 30-year mortgages. When inflation is high, the Fed raises the rate to discourage borrowing and cool down the economy, allowing supply and demand to rebalance. When the job ...

In Depth Options for modernizing the FOMC’s operating target interest rate Lorie Logan and Sam Schulhofer-Wohl The Federal Open Market Committee primarily adjusts the stance of monetary policy through its target range for the federal funds rate. We discuss whether the fed funds rate remains the right operating target for short-term interest rates.This essay was published in conjunction with a speech delivered by Dallas Fed President Lorie Logan. | Read the speechThe Federal Open Market Committee (FOMC) pr ...